CHAN KAM CHING JOHN BARRY v. COMMISSIONER OF POLICE

HCAL181/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO.181 OF 2013

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J U D G M E N T

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1.  In the morning on 18 December 2013, the applicant, a practicing solicitor, was arrested at home for ‘conspiracy to defraud’ by the police. A team of police officers then searched his home and office on the authority of two warrants issued by a magistrate. Nothing was seized from the applicant’s home. Later, the police seized 37 files from his office. On further enquiry by the police, the applicant allegedly agreed to lead the police to Yeung Uk warehouse (the warehouse) where old files of his firm were stored. An additional 144 files were seized. The applicant claimed legal professional privilege (LPP) in relation to all seized files. They were sealed inside carton boxes subject to court order.

2.  The applicant sought leave to apply for judicial review of the above search on the following grounds:

a. There was insufficient evidence to support the issue of the two warrants.

b. The warrants were too wide and lack specificity.

c. The search of the warehouse was unlawful.

d. All files seized were subject to LPP.

Was there sufficient evidence to issue the two warrants?

3.  The investigation was a follow up action from a trial (DCCC157/2013) in the District Court.  The applicant was a defence witness in that trial in September 2013.  The trial judge was HHJ Sham.  The charges in that case were ‘Dealing with proceeds of an indictable offence’[1]. During the defence case, the applicant gave evidence on several land transactions which formed the basis of the investigation and the search as follows:

a. In relation to the purchase of the property at No. 13A Yeung Siu Hang, the assignment prepared by the applicant contained a clause that the purchaser paid $3 million to the vendor as the consideration.  The applicant confirmed under oath that this clause was not true.  In fact, no money was ever paid.  This was done to ensure that the purchaser had the legal title.  The purchaser was able to obtain a mortgage loan from a finance company based on that purported payment.  The applicant also admitted that this clause was a standard practice in many similar cases he handled.[2]

b. In relation to the purchase of the property at No.1545A Yeung Siu Hang, the assignment prepared by the applicant contained a record that the purchaser paid $750,000 to the vendor as the consideration.  There was also an acknowledgement of receipt.  The applicant confirmed under oath that this was not the real situation.  The purchaser did not pay the sum.  This was done to avoid any query that the assignment was a deed of gift.  He admitted that this was a standard practice.[3]

c. In relation to five land assignments in which Charter Gold Trading Ltd. was the vendor, there was a clause recording that Charter Gold Trading Ltd. had received certain sum from the purchasers as the consideration.  The applicant confirmed all these clauses were not true.  Charter Gold Trading Ltd. did not receive any sum.  This was his standard practice.  It avoided any query from subsequent purchasers that the assignment was a deed of gift.[4]

d. In relation to four land assignments involving Grand Winner Trading Ltd, similar false payment clauses were inserted into the assignment prepared by the applicant for similar reasons.[5]

4.  On 17 December 2013, based on the above evidence, Detective Senior Inspector Cheung Hang Fai applied for two warrants to search the home and office of the applicant.  The information in support of the application was not disclosed.  In fact, I accept it is under Public Interest Immunity.  However, I accept that the magistrate must have the information similar to that set out in the affirmation of Detective Senior Inspector Cheung.[6]

5.  The warrants were issued under s.50(7) of the Police Force Ordinance.  In gist, that section provides that when a magistrate is satisfied on sworn information that an offence has been committed or reasonably suspected to have been committed.  The magistrate may issue a search warrant empowering any police officer, to enter, search and seize in any building and place, documents and articles likely to be of value to the investigation of that offence.

6.  A warrant is valid when it is issued by the proper authorities.  It must be directed to proper people and clearly identified the place to be searched.  The articles sought must be sufficiently indicated.  The offence must also be sufficiently revealed.

7.  The law only requires that a magistrate to be satisfied that an offence has been committed or reasonably suspected to have been committed.  Whether there should be additional conditions to limit the scope of the warrant is within the implied power of the magistrate.  The lack of conditions would not affect the validity of a warrant.

8.  In Philip KH Wong, Kennedy YH Wong & Co v Commissioner of ICAC, Stock V-P commented:

“ The statutory provision with which we are concerned does not prescribe any form for a warrant under s.10B of ICACO. As a matter of necessary implication, the warrant must contain the details to which the statutory provision itself refers. In this case that means that the warrant must be directed at an officer of the Commission appointed under s.8 of ICACO and must show, on its face, that the Magistrate, before issuing it, was satisfied by information on oath that there was reason to believe that there was in premises material which contained evidence of the commission of an offence or offences referred to in s.10 of ICACO and whom it is that he has authorized to enter and search the premises.

Beyond that it is well established by the authorities to which reference has been made that the warrant must clearly identify the place to be searched and sufficiently indicate the articles which are sought and also the offence in respect of which the warrant is issued…

Any further requirement is one that would have to be discerned by implication. To justify an implication, courts regularly ask whether the implication is ‘necessary’ or ‘clear’ or ‘obvious’, a test that has been criticized as too narrow by Mr Bennion who prefers the adjective ‘proper’.[55] Bennion, Francis, Statutory Interpretation: A Code (4^th ed., 2002) s. 173.

It seems to me that to read an implication into s. 10B which requires, as a condition precedent to validity of the warrant, the imposition of conditions for the execution of a search is impermissibly to transform that which is thought desirable into legislative intention.”[7]

9.  The Philip Wong case concerns s.10B of the ICAC Ordinance Cap.204 and we are concerned with s.50(7) of the Police Force Ordinance Cap.232.  Both sections require the magistrate issuing the warrant to be satisfied that, there is reason to believe[8] or reasonably suspected[9], that an offence has been committed.  There is no requirement as to the form of the warrant.  I appreciate that an ICAC officer is separately authorized under s.10C to seizure any documents while s.50(7) included the power to seize under a warrant.  This difference would not affect the spirit of both sections.  In my view, the same principle should govern the validity of a warrant issued under the Police Force Ordinance and the ICAC Ordinance.

10.  Given the evidence of the applicant under oath summarized above, I am satisfied that the magistrate must have reasonable suspicion that an offence had been committed, be it ‘conspiracy to defraud’ or ‘conspiracy to use false instruments’.  The warrants clearly set out the premises to be searched, the offence and the documents aimed at.

11.  Counsel for the applicant, Mr Oderberg, pointed out that in DCCC157/2013, HHJ Sham was only concerned with the transaction in relation to the property at No. 13A Yeung Siu Hang.  There was no finding with regard to other assignments.  The warrants which covered other assignments must be ulta vires and invalid.

12.  In the District Court trial, HHJ Sham was concerned with charges of ‘Dealing with proceeds of an indictable offence’.  The transaction at No. 13A Yeung Siu Hang was the subject matter of the defence in one of the charges.  The main thrust of the applicant’s evidence was to explain the validity of transactions in ‘village house’ or ‘ding house’.  However, he mentioned the false payment clauses in the assignment documents which were not the central issues of the charges.  There was no need for HHJ Sham to make any ruling or comment on those clauses.

13.  On the other hand, the follow up investigation concerned his practice in assignments of ‘village house’ or ‘ding house’.  His evidence showed that he had put the false payment clauses in all assignment documents as a practice.  In my view, the judgment of HHJ Sham in DCCC157/2013 should not limit the scope of the follow up investigation.

Were the warrants too wide and lacked specificity?

14.  The warrants empowered the police to take possession of agreements, documents, accounts records etc., in relation to any suspected false land assignment, which are likely to be of value to the investigation of offences—‘conspiracy to defraud’ and ‘conspiracy to use false instruments’.

15.  Counsel for the applicant criticized that the warrants were too wide relying on the case of Re Application by Messrs Ip and Willis for leave to apply for judicial review [1990] 1 HKLR 154.  In that case, Sears J held that a warrant issued under s.10B of the ICAC Ordinance was invalid.  In that case, the warrant merely recited that the magistrate has reason to believe that in the solicitor’s premises ‘there may be anything referred to in s.10 of ICACO’.

16.  In fact, there are many offences included under s.10(5) of the ICAC Ordinance.  The warrant did not specify which offence.  Further, the warrant did not indicate sufficiently the class of material to be searched.

17.  As Stock V-P commented in Philip Wong case:

“It is difficult to envisage a warrant drawn in broader terms and hardly surprising that Sears J decided that the warrant was ‘so wide and general in its terms as to be invalid.’”[10]

18.  It is interesting to note the comment of Sears J about the submission by the prosecution in Re Application by Messrs Ip and Willis:

“ Miss Hartstein, who recognises the inherent problems of the search warrant as a document submits that the officers had made it clear to the solicitors the reason for the search and the documents they required.

It is right that I should emphasise that the ICAC officers here conducted themselves openly and courteously. They had a number of conversations with the solicitors who were in no doubt that it was their clerk who was being investigated and what was required to produced.

Nevertheless what is being challenged here is the issue of the search warrant by the magistrate.

Although I accept that the officers behaved perfectly properly, the warrant they had did not authorise them to enter and whatever they explained, or however they themselves sought to limit the scope of the warrant, the entry and any subsequent seizure were unlawful.”[11]

19.  Sears J agreed that the officers who executed the warrant could qualify the scope of the warrant at the scene provided that the warrant was valid at the outset.  In my view, this is the correct approach. While there might be some ambiguities as to the exact documents to be searched, the officer executing the warrant could have explained it clearly before the search. 

20.  The law only requires that the warrant sufficiently indicate the documents and articles which are sought.  In our case, the two warrants identified documents and articles in various forms.  It specified that they must be related to false land assignments in relation to the offences of ‘Conspiracy to defraud’ and ‘Conspiracy to use false instrument’.

21.  The applicant was arrested for the offence of ‘conspiracy to defraud’ before the warrants were executed.  Although the officer only mentioned No.13A Yeung Siu Hang in the caution statement taken shortly after the arrest, it was obviously a holding charge.  It should not be used to limit the scope of the search the basis of which was his evidence in DCCC157/2013.

22.  I have also considered the circumstances of the execution of the warrants.  In the affirmation of Detective Senior Inspector Chu Chi Keung, he stated that he only demanded files in relation to assignments of ‘village house’ for the period 1 January 2007 to 18 December 2013.[12]

23.  The above is also confirmed in the affirmation of Mr Chu Chung Wah, solicitor representing the applicant.[13]  It is also confirmed in the affirmation of the applicant.[14]  In fact, the files were identified by the applicant’s staff and handed over to the police.

24.  Further, each warrant contained a paragraph for sealing the items which may be covered by legal professional privilege until this issue was resolved.

25.  In my view, the applicant must be aware of the background giving rise to the search and the material which the police was aiming at.[15]  The scope of the warrant was appropriately qualified by the police officers.  The scope of the two warrants was not too wide nor did it lack specificity.

Was the search at Yeung Uk warehouse unlawful?

26.  Counsel for the applicant argued that there was no warrant authorizing the search of the warehouse.  While there was an entry in the notebook of DPC3882 that the applicant consented to the search, Mr Oderberg submitted that this must be viewed against the background that the applicant opposed the seizure of his files all along.

27.  In addition, the applicant had only agreed to take police officers to the warehouse, he had not consented to enter and search.  The applicant stressed that the police should have applied for another warrant before searching the warehouse.

28.  Counsel for the putative respondent, Ms Maggie Yang, pointed out that the applicant signed the police notebook in the presence of his lawyer.  There was no indication whatsoever that he was under pressure.  The files were identified by the staff and surrendered to the police.

29.  Ms Yang further argued that the search of the warehouse was authorized under s.50(6) Police Force Ordinance.  This section allowed the police to search an arrested person and also search in or about the place at which that person was arrested.  The police may also take possession of any item which may be of value to the investigation of the offence committed or reasonably suspected of having committed.

30.  The entry in the police notebook was in these terms: “Are you willing to take the Police to the place you mentioned in Yuen Long Au Tau Yeung Uk village, where old files were stored, for a search?  If you consent, please sign to confirm.”  The applicant signed on the notebook to confirm consent.

31.  The meaning of the entry is plain.  The applicant agreed to take the police to search the warehouse.  While there was no mention of entry, seize or take possession, common sense dictated that it must include those acts.

32.  The applicant is an experienced solicitor.  His lawyer accompanied him during the incident.  While he maintained that he opposed the search under the warrants all along, there was no allegation that the police had exerted any undue pressure on them in relation to the search of the warehouse.  I cannot see why the applicant signed on the notebook to acknowledge consent if it was against his will.

33.  I agree with Ms Yang that s.50(6) is applicable as the applicant was an arrested person at that time.  The police was entitled to search the warehouse which was in the vicinity of the applicant’s home—the place of arrest.  In my view, s.50(6) does not require consent from the arrested person before a search.

34.  During an operation, the police could use different kinds of power under different sections of the Police Force Ordinance or other ordinances.  Each kind of power may be exercised in conjunction with the others.  There is no unfairness.

Did the files seized attract legal professional privilege?

35.  The principle on legal professional privilege is well settled.  The legal adviser shall not be compelled to disclose confidential communications with the client: (1) which are for the purpose of giving legal advice, and (2) which are made in the course of litigation or in the contemplation of litigation.

36.  The applicant argued that the files seized could be subject to legal professional privilege (LPP).  They were conveyancing files which might contain advice on financing matters.  The advice was made under lawyer client relationship and should be covered by LPP.  The applicant could not waive this protection for the clients.  The wide scope of the search warrants was unreasonable.

37.  The applicant relied on the comment by Watkins L.J. in Reg. v Crown Ct., Ex p. Baines & Baines (A Firm) and Another [1988] 1 Q.B. 579 as follows:

“ It is, of course, perfectly clear that, usually anyway, conveyancing matter is wholly unconnected with litigation. What is really to the point, however, is whether it is encompassed by the words ‘communications between a professional legal adviser…made in connection with the giving of legal advice to the client’

In many conveyancing transactions advice will be given by the solicitor to his client upon factors which serve to assist towards a successful completion, the wisdom or otherwise of proceeding with it, the arranging of a mortgage and so on. I doubt if it can possibly be denied that advice of that kind is a privileged communication. But with one possible exception the constable by the notice does not seek production of material in connection with the giving of advice. He seeks records of the conveyancing transaction itself.”[16] (my emphasis)

38.  The above case concerns an application for a production order under the Criminal Evidence Act 1984[17].  The purchaser was acquitted of armed robbery.  The money for the purchase of the house in question was suspected to be proceeds of the robbery. The solicitors handling the transaction were ordered by a judge to produce, in relation to the purchase of that house, ‘all client account records…, paid cheques, inter account transfers, telegrahic transfers, all credit and debit slips, mandate, details of money market deposits and correspondence concerning financial transactions’. (my emphasis)

39.  Watkins L.J. held that ‘correspondence concerning financial transactions’ was communication between solicitors and client.  It might well be privileged as it contained legal advice.  It should not be the subject matter of the production order.  Having said that, Watkins L.J. indicated that the deletion of the reference to correspondence might cure the defect.[18]

40.  Watkins L.J., however, pointed out that the records of the conveyancing transaction itself would not be privileged.  His Lordship continued in the judgment:

“ That still leaves the main issue to be resolved, namely is conveyancing matter of itself privileged as coming within the meaning of the giving of advice? We were referred to no authority. I doubt that any is needed for the proposition that the document known as the conveyance is not clothed with privilege and I do not see why conveyancing matter, as I have called it, can validly be said to be, seeing that in my opinion in common sense it cannot be called advice consisting as it does of records of the financing of the purchase of, in this case, a house.”[19]

41.  As a matter of fact, the warrants in our case authorized the police to search and take possession of “all agreements, documents, articles, computer records, properties, company records, working papers, account records, instructions, conference and telephone attendance records, fee notes, invoices, bills and receipts and any supporting documents in relation to any suspected false land assignments.”

42.  In my judgment, the warrants in our case did not aim at records of legal advice or other records which were communications made in connection with giving legal advice.  Bearing in mind that the scope of the warrants was narrowed down by Detective Senior Inspector Chiu before execution as discussed above, I am of the view that the warrants were not unreasonably wide.

43.  The applicant did not indicate which part of the files might attract LPP.  Nowhere in his affirmations had he indicated that documents covered by LPP might have been seized.  I agree with the observation of Watkins L.J. above that conveyancing records were not normally privileged in nature.  In my view, it was most unlikely that the seized files contained records attracting LPP.

44.  Ms Yang further argued that even assuming the files were covered by LPP, they were excepted as the content of the files were made in the course of a criminal purpose.[20]  She also submitted that a court needed only to satisfy on a prima facie basis that the documents were made with a criminal purpose.[21]

45.  The fraud exception was discussed in detail in Citic Pacific Ltd. v Secretary for Justice[22], Hartmann JA (as he then was) cited with approval the principle laid down in R v Cox and Railton per Stephen J [23]:

“ The question, therefore, is whether, if a client applies to a legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged? We expressed our opinion at the end of the argument that no such privilege existed. If it did, the result would be that the man intending to commit treason or murder might safely take legal advice for the purpose of enabling himself to do so with impunity, and that the solicitor to whom the application was made would not be at liberty to give information against his client for the purpose of frustrating his criminal purpose. Consequences so monstrous reduce to an absurdity any principle or rule in which they are involved.”

46.  Hartmann JA stressed that the “fraud exception” should be exercised with considerable caution[24].  He agreed with the two stage test set down in R v Gibbins[25]: (1) whether there was a prima facie case of fraud exists; and (2) whether the document concerned came into existence as part of the fraud.

47.  In this respect, I have considered the evidence given by the applicant in DCCC153/2013 summarized in paragraph 3 above.  The admissions by the applicant under oath were clear—he inserted the false payment clause in all assignment documents in relation to village house transactions as a matter of practice.

48.  I have also considered the assignments in relation to Charter Gold Trading Ltd. exhibited in the affirmation of Detective Senior Inspector Cheung Hang Fai[26].  In each of these assignments, the applicant signed to confirm that he explained the content to the purchaser.  In each of the assignments there was the false payment clause and acknowledgement of receipt.  In my view, both purchaser and vendor in these transactions must be fully aware of the fact that no payment was made.  I am also satisfied that similar documentation existed in other transactions.

49.  Given this evidence, I am satisfied that a clear prima facie case of conspiracy to defraud is established in all transactions summarized in paragraph 3 above.

50.  The applicant was fully aware of the circumstances of the transactions and the falsity in the assignments.  He prepared the assignments with the false payment clause.  There is a clear prima facie case that the assignment and all related records came into existence because of the fraud.

51.  I agree with Ms Yang that the fraud exception applies.  The LPP claim is excluded because the files and the documents therein were made in furtherance of a criminal purpose by the applicant and his clients.

Conclusion

52.  In my judgment, this application is not reasonably arguable and with no realistic prospect of success.

53.  I make the following order:

a. Application for leave is dismissed.

b. The files seized by the police will remain sealed until the expiry of the appeal period or any further order by this court or the Court of Appeal.

c. Costs of the ex parte summons dated 1 April 2014 be to the putative respondent.

d. Costs of the inter parte summons dated 9 April 2014 be to the putative respondent.

54.  I further make an order nisi that costs of this application be to the putative respondent.  This order shall become absolute 14 days from the date of this judgment unless any of the parties applies by summons for variation.